Using this you can limit, say a reference selector dropdown, based on the Constrained By path you set on it.
If you have 2 reference selector dropdowns in your dataview, you can set your Constrained By on the second dropdown to only show the objects that are linked to the option chosen in the first dropdown.
You can read more on the wiki General Properties Forms.
I think this can be best explained using an example. When you have an order that has a relation with a customer and a firm. Of course the firm has also a relation with one or more customers.
Now in the order form you have two reference selectors, one for customer and one for firm. Using the constrained by property on customer you can select the relation between customer and firm. When doing this only the associated customers with the selected firm will become visible.